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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. AVC = TVC/Q






2. Models where firms agree to mutually improve their situation






3. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






4. When firms focus their resources on production of goods for which they have comparative advantage






5. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






6. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






7. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






8. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






9. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






10. The most desirable alternative given up as the result of a decision






11. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






12. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






13. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






14. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






15. The output where ATC is minimized and economic profit is zero






16. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






17. The change in quantity demanded resulting from a change in the price of one good relative to other goods






18. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






19. Exists at the point where the quantity supplied equals the quantity demanded






20. The imbalance between limited productive resources and unlimited human wants






21. Ed > 1 - meaning consumers are price sensitive






22. 0 < Ei < 1






23. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






24. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






25. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






26. The additional cost incurred from the consumption of the next unit of a good or a service






27. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






28. Ed < 1






29. The difference between total revenue and total explicit costs






30. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






31. The total quantity - or total output of a good produced at each quantity of labor employed






32. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






33. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






34. Product demand - productivity - prices of other resources - and complementary resources






35. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






36. The sum of consumer surplus and producer surplus






37. Exists if a producer can produce a good at lower opportunity cost than all other producers






38. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






39. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






40. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






41. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






42. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






43. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






44. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






45. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






46. The marginal utility from consumption of more and more of that item falls over time






47. Entry (or exit) of firms does not shift the cost curves of firms in the industry






48. A good for which higher income increases demand






49. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






50. Costs that change with the level of output. If output is zero - so are TVCs.